California property owners hoping to open new insurance policies can no longer do so with one of the largest homeowners insurance companies in the country.
Allstate, the state’s fourth-largest property and casualty insurance provider, has stopped selling new home, condominium or commercial insurance policies in California, the company said in an emailed statement. It is the latest insurance giant to say it will no longer provide coverage, citing a deteriorating climate and higher construction costs that have made it more difficult to do business in the country’s most populous state.
State Farm, California’s largest homeowners insurer, made a similar decision last week, citing “rapidly growing catastrophe exposure.” Allstate stopped accepting new policies in the state last year, according to the statement.
“We discontinued new homeowners, condo and commercial insurance in California last year so we can continue to protect current customers,” the Allstate statement said. “The cost of insuring new home customers in California is much higher than the price they would pay for policies due to wildfires, higher home repair costs and higher reinsurance premiums.”
The news was previously reported by The San Francisco Chronicle and in industry publications.
Allstate’s decision in California follows a pattern seen across the United States: Insurance companies are raising rates, limiting coverage or ceasing operations in areas vulnerable to climate change and natural disasters. In Florida, most major insurance companies have pulled out of the state, with homeowners relying on smaller private companies, whose resources are being stretched, to protect their homes from the severe storms that have become typical.
In the statement, Allstate cited other factors in pausing new policies in California, including state regulations and inflation, which have led to increased reconstruction costs.
It’s not the first time Allstate has restricted new homeowners insurance sales in California. That happened in 1994, after the Northridge earthquake. The company eventually returned to the state, but stopped new homeowners insurance there again in 2007. Ten years later it returned to the California market.
The combined moves by California’s Allstate and State Farm could lead more state property owners to rely on the FAIR Plan, a state-provided “insurer of last resort” in high-risk fire areas. As of 2022, there were more than 270,000 FAIR policies — more than double what was offered in 2018 — as worsening wildfires and an exodus of traditional insurers from fire-threatened areas led some homeowners to rely on the program, which offers temporary, and generally more expensive, fire cover.
The FAIR plan requires insurance companies operating in California to cover losses commensurate with their market share in the state.
